As part of the Bush tax cut compromise, it looks like Obama’s 2011 proposal for full deduction for equipment purchases will pass. 



As we wrote about in “DARE WE SAY THERE MIGHT BE  A NEAR TERM REPLACEMENT CATALYST” (09/16/10), Obama’s temporary 100% expensing proposal would allow companies to immediately deduct the full cost of equipment purchased between Sept 8, 2010 and Dec 31, 2011.  For equipment purchases, the complete write-off will lower overall effective tax rates and the cost of capital as shown below.




We believe the passage of this proposal comes at an opportune time as casino operators remain cautious about investing during the current recovery.  Accelerated depreciation could help spark the long-awaited recovery in replacement demand.


Appendix: Treasury Report highlights



The Macau Metro Monitor, December 6th, 2010



According to secretary for Transport and Public Works, Lau Si lo, the Macau Government has decided to push forward with the recall of five undeveloped plots and two pending plots.  The process to declare that the concession of these areas has lapsed has already begun, he explained. 



Secretary Tam refused to comment on whether the Macau government is preparing to implement a cap on slot-machines.
“Limiting the number of gaming tables is a first step to control the scale of the gaming industry, and we are reviewing other policies in order to reach a measured development of the gaming industry,” Mr Tam said.  Mr. Tam also said that the government is finalizing a by-law to regulate slot machine parlours, including location, and that the government is keen on increasing the share of the mass market in the overall casino business.


It’s gotten colder out and frappes and smoothies are slowing down considerably.  The hot lattes are not making up the difference.  McRib was a social media darling but it did not move the needle that much.


McDonald’s is scheduled to report its November sales numbers before the market open on Wednesday, December 8th.  November had one less Sunday, and one additional Tuesday, than November 2009.  Based on this, it seems possible that there may be a negative sales shift. 


Consensus estimates are calling for comparable store sales numbers in line in the U.S., slowing down in Europe, and slightly positive sequentially in APMEA.  On a relative basis, MCD continues to out-gun the competition.  However, I am seeing a slight slowdown in sales trends for MCD and I believe that consensus may be overly optimistic for November. 


To recall, October comparable restaurant sales numbers from McDonalds indicated a slowdown in the U.S. region based on two-year average trends.  For comparison purposes, I have adjusted for calendar and trading day impacts.  Europe and APMEA both slowed in October following strong results in September on a two-year average basis.  In November, Europe and APMEA need to print strong headline comparable restaurant sales numbers to maintain two-year average trends.


U.S. – facing an easy -0.6% compare (including a calendar shift which impacted results by -0.9% to -1.7%, varying by area of the world): As of today, consensus is forecasting a print of 5.1% for McDonalds U.S. region comparable store sales in November. 


GOOD:  A print of more than 4% would be perceived as a good result as it would imply that the company improved two-year average trends by 50 basis points or more.  While this would not bring trends back to the lofty levels seen in the summer months, it is perhaps unrealistic to expect a repeat of those numbers in the absence of hot weather-induced beverage and smoothie sales. 


NEUTRAL:  Roughly 3% to 4% implies two-year average trends that are approximately flat versus trends seen in October.  Of course, this would indicate that two-year average comparable restaurant sales were significantly below summer levels.  The summer sales of frappes and smoothies are well and truly behind the company as winter sets in.


BAD:  Below 3% would indicate a further decline in two-year average trends in MCD’s U.S. business from October’s

significant decline.  It would also imply the lowest comparable restaurant sales number since February. 


MCD – NOVEMBER SALES PREVIEW - mcd chart sales preview



Europe – facing an easy +2.5% compare (including a calendar shift which impacted results by -0.9% to -1.7%, varying by area of the world):  As of today, the consensus estimate is for Europe to post +4.9% comparable restaurant sales growth. 


GOOD:  A print of roughly 7.5% or higher would imply two-year average trends slightly below or above the two year average trends seen in October.  October was a strong month in Europe for MCD but a significantly higher print will be required to maintain two-year average trends.  A 7.5% number would be the strongest result since May 2009. 


NEUTRAL: A result of 5.5% to 7.5% would imply that sequential trends had decelerated by up to approximately 100 basis points.  5.5% is still a relatively high level; in fact, it exceeds all months’ results year to date except for March, May and October.  Offsetting that positive aspect is the fact that two-year trends would slow sharply.  In addition, a relatively high number is to be expected against a poor 2.5% print for November 2009.


BAD: Less than 5.5% would imply a deceleration of more than 100 basis points in two-year average trends from October.  Furthermore, two-year average trends would fall below 5%, which, with the exception of August, has not happened since February 2010.    



APMEA – facing an easy -1.0% compare (including a calendar shift which impacted results by -0.9% to -1.7%, varying by area of the world):  As of today, the consensus estimate is for APMEA to post +6.4% in same-store sales growth. 


GOOD: Roughly 9% or higher would imply a steady-to-slight acceleration from the results seen in October.  October saw a significant slowdown in MCD’s APMEA business on a two-year average comparable restaurant sales basis.  A lofty headline print is likely given the weak result of a year ago.  The two-year trend implied by this print will be important to watch.   


NEUTRAL: Between 8% and 9% would imply two-year average trends slightly lower than those seen in October. 


BAD:  Below 8% would imply a significant slowdown from the two-year average trend in October and a return to the level of two-year average trends seen in June, which was a lackluster month for MCD APMEA.


Howard Penney

Managing Director


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A 20% Drop In Home Prices Will Feel Like a Punch In The Face


TODAY’S S&P 500 SET-UP - December 7, 2010


As we look at today’s set up for the S&P 500, the range is 35 points or -1.89% downside to 1200 and 0.97% upside to 1235. 

  • Obama, GOP reach a deal on taxes by extending the Bush tax cuts for two years
  • emerging market demand, Barron’s said
  • AGL Resources, (AGL) and NICOR to combine in $8.6B transaction
  •  FT writes that oil is forecast to pass its current two-year high above $90 a barrel to beyond $100 – this would hinder economic recovery
  • Barron’s reports that an Irish tax hike could hurt some U.S. software stocks.  ADBE, VMW, MENT, MFE, SYMC and others are mentioned in the report
  • William Conway said that Carlyle is gearing up for an IPO to boost buyout-fund capital, according to Bloomberg
  • WikiLeaks founder, Julian Assange, was arrested in London


  • One day: Dow (0.17%), S&P (0.13%), Nasdaq +0.13%, Russell +0.59%
  • Month-to-date: Dow +3.24%, S&P +3.61%, Nasdaq +3.87%, Russell +4.66%
  • Quarter-to-date: Dow +5.32%, S&P +7.18%, Nasdaq +9.55%, Russell +12.53%
  • Year-to-date: Dow +8.96%, S&P +9.69%, Nasdaq +14.36%, Russell +21.66%
  • Sector Performance: Energy +0.26%, Tech +0.07%, Materials +0.02%, Consumer Discretionary (0.01%), Telecom (0.03%), Industrials (0.18%), Financials (0.22%), Consumer Staples (0.27%), Utilities (0.47%), and Healthcare (0.68%)


  • ADVANCE/DECLINE LINE: -42 (-770)  
  • VOLUME: NYSE 803.64 (-11.38%)
  • VIX:  18.02-7.12% YTD PERFORMANCE: -16.90%
  • SPX PUT/CALL RATIO: 1.32 from 1.31 +0.37%


  • TED SPREAD: 17.77 -0.102 (-0.569%)
  • 3-MONTH T-BILL YIELD: 0.15% +0.01%  
  • YIELD CURVE: 2.53 from 2.54


  • CRB: 317.29 +0.360%
  • Oil: 88.92 -0.30%
  • COPPER: 400.65 +0.19%
  • GOLD: 1,414.90 +0.61%


  • EURO: 1.3297 -0.87%
  • DOLLAR: 79.638 +0.33%




  • Europe is trading up at the moment.  News of the Bush-era tax cuts being extended is trumping sovereign debt concerns for now
  • Irish budget vote takes place tomorrow.  Passage of the vote is a requirement of the EU bailout
  • Troubles continuing across the broader Eurozone  but Merkel holding firm and rejecting the proposals for a bigger fund and Europe-wide bonds
  • Tesco increased 2.2% as the retailer said that 3Q sales rose 8.8%, led by growth outside of the U.K. 
  • Unilever also gained on an upgrade
  • U.K. Factory Production grew more than forecast in October.  Output rose 0.6% from September.  This was the strongest growth for seven months.
  • Russia moved closer to WTO membership after signing an MOU with the EU that set the terms to resolve all EU-Russia bilateral issues. 


  • Markets ended mostly higher today following Obama extending the Bush tax cuts and Ireland prepared for a budget vote
    • China Shanghai A Share finished up +0.65%
    • Korea KOSPI 100 finished up +0.55%
    • Japan Nikkei 225 finished down -0.26%
  • Japanese stocks declined on fears that the yen will resume strengthening and hurt exports
  • Australia left the cash rate unchanged at 4.75%, market gained +0.77%
  • Bloomberg reports that speculation is mounting that China may raise rates this weekend

Howard Penney

Managing Director


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The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

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